The trick is to avoid the trap of confusing needs with wants. A good start is to clearly define the difference.
What is a ‘need’?
A “need” in the strictest sense of the word is something you must have to get by in the world – a NECESSITY. This includes:
- medical care
It?s likely that you will experience physical suffering of some sort if you don?t have your basic needs met.
What is a ‘want’?
A “want” is something you desire – something that you would like to have. You won?t, however, suffer in any way (except perhaps mental anguish!) if you don?t get the thing you want. “Wants” quite often fall into the category of LUXURIES – nice to have, but the world won?t end without them. Most of the things in our lives that we purchase are wants, as we could live without them.
The high cost of wants
Becoming a slave to “wants” soon gets your spending out of whack, as you gradually shell out more and more of your hard-earned money on the latest “gotta have”. Advertising and peer pressure play their part in influencing this behaviour and taking the materialistic road can lead to debt, stress, guilt and anxiety.
Making the distinction
It?s tempting in an affluent society like ours to go crazy and try to buy stuff you?ve always wanted. This is only natural but you need to keep things clearly in perspective and prioritise your goals. For example, if you are saving up for your first car, perhaps set your sights on a cheap runabout rather than the latest BMW. Instead of spending thousands on an iPhone, why not buy an older model or an Android smartphone? Being realistic when it comes to your spending can help you make better financial decisions and limit impulse buying, saving you more in the long run and learning financial discipline.
Buy what you can afford, keep some money aside for a rainy day and you?re on your way to being in charge of your finances, rather than the other way round. Give our Budget Planner calculator a try as a great way to kickstart your new needs/wants financial plan.